Components for 4G LTE iPad estimated to cost $310, netting Apple 51% margins
Apple's third-generation iPad will have a slightly lower hardware-based profit margin of about 51 percent, based on a new estimate of hardware costs.
The analysis from UBM TechInsights suggests that a 16-gigabyte iPad with 4G LTE connectivity costs $310 in components, up from $270.86 for the original iPad, and $276.27 for the iPad 2 at their respective launches. That would mean that Apple's profit margins have been reduced from about 57 percent on its first two iPad models to 51 percent on the latest-generation tablet.
The most expensive component on the third-generation iPad is believed to be its high-resolution Retina Display. UBM has estimated that the display costs $70, followed by $30 for the battery and $25 for the touchscreen.
Other major component costs are estimated at $12.50 for the camera, $16 for NAND flash storage, $28 for the custom A5X processor, $8.50 for the SDRAM, and $7 for the Wi-Fi, Bluetooth and GPS radios.
The battery, in particular, has grown significantly from the iPad 2, as the latest model sports a capacity of 11,180 mAh, compared to 6,580 mAh for last year's model. The new iPad also has double the RAM of its predecessor, with 1 gigabyte, and has added high-speed LTE 4G wireless connectivity.
"The bottom line is the new iPad's margin should take a little hit because of some of the expensive adders like LTE, the high-res display and camera, a bigger battery and faster processor," said Jeff Brown, senior analyst at UBM TechInsights.
As for the 16-gigabyte iPad 2, which Apple will continue to sell for $100 less, the bill of materials for the 3G model is estimated to be $248.07, a price lower than last year's launch because component prices have fallen over the last 12 months. If accurate, the estimate would peg margins on the iPad 2 at 53 percent.
[ View article on AppleInsider ]
Comments
netting Apple 51% margins
Yes, because R&D, shipping, advertising, assembly, packaging, software development, and three years of updates is 100% free.
Come on, guys. You're perpetrating the lies that the trolls use.
Yes, because R&D, shipping, advertising, assembly, packaging, software development, and three years of updates is 100% free.
Come on, guys. You're perpetrating the lies that the trolls use.
Beat me to it!
Yes, because R&D, shipping, advertising, assembly, packaging, software development, and three years of updates is 100% free.
Come on, guys. You're perpetrating the lies that the trolls use.
*sigh*
There's always this comment.
First, in figuring gross margins for a product things like R&D, advertising and software development are generally. not included.
The other costs you've mentioned are of course.
But, more than that. This tear down is only one perspective of a total analysis. I don't think anyone who does these is claiming Apple is actually making 50% on these devices. They are simply looking at the things they are able to analyze.
Chill.
Yes, because R&D, shipping, advertising, assembly, packaging, software development, and three years of updates is 100% free.
Come on, guys. You're perpetrating the lies that the trolls use.
My thoughts exactly. The development time has to be taken into account, but too many times people see stuff like this and start talking about "greedy corporations." Don't get me wrong because there is greed in some corporations just as there is greed in many other areas of society. OTOH it's not a crime to want to make a profit. But I think this article overstates the profit because it fails to account for all of the expense that went into developing the ipad.
Yes, because R&D, shipping, advertising, assembly, packaging, software development, and three years of updates is 100% free.
Come on, guys. You're perpetuating the lies that the trolls use.
Fixed it for you
Yes, because R&D, shipping, advertising, assembly, packaging, software development, and three years of updates is 100% free.
Come on, guys. You're perpetrating the lies that the trolls use.
+1 Never mind the real facts, just spread lies about how Apple is ripping everyone off... If anything companies that don't make the OS, but simply modify someone else's work, and try to sell their tablets for just as much are ripping people off.
I don't think anyone who does these is claiming Apple is actually making 50% on these devices. They are simply looking at the things they are able to analyze.
Chill.
The article title states that Apple is "netting" 51% profit. That means that they are claiming that that is what Apple is making.
The article title states that Apple is "netting" 51% profit. That means that they are claiming that that is what Apple is making.
So AI's headline is wrong and misleading. But the overall gist is that this is purely a hardware gross margin.
Additionally the original EET article is more a comparison of previous to new iPad hardware costs and assuming those are the bulk and most variable of the costs between the two, it seems like a reasonable thing to be looking at.
/s
*sigh*
There's always this comment.
First, in figuring gross margins for a product things like R&D, advertising and software development are generally. not included.
The other costs you've mentioned are of course.
But, more than that. This tear down is only one perspective of a total analysis. I don't think anyone who does these is claiming Apple is actually making 50% on these devices. They are simply looking at the things they are able to analyze.
Chill.
Only partially true. It is possible to assign any direct costs to COGS (cost of goods sold) regardless of the category. The key is whether it's a direct cost or not. For example, if you offer a $50 rebate on the product (where the rebate is tied directly to the purchase of the product), it is possible to include that in COGS.
Even then, there's some gray area.
Direct costs - almost always included in COGS:
- Materials
- Assembly labor
- Inbound shipping
- Direct quality labor (i.e., QC employees)
- Labor for receiving and shipping goods
- Packaging materials
- Disposal of scrap (or recovery of value for scrap)
- Rejected product
- Rework costs
Direct costs that may or may not be included in COGS, depending on corporate accounting standards:
- Manufacturing overhead like utilities and other costs that change depending on the quantity shipped
- Quality overhead
- Some marketing costs (for example, rebates or other bonuses paid to distributors based on volume)
- Very specific development costs (not usually included in COGS but can be if the cost can be directly tied to quantity shipped. For example, if there were a cost for registration and customization of a product for each customer, that could be a direct cost)
- Licensing costs (very frequently included in COGS, but it depends on the license agreement)
Indirect costs - not included in COGS. In general, these are costs that you have to spend regardless of how many units are shipped:
- Product development
- General marketing and sales costs
- General manufacturing overhead costs (those costs that don't change regardless of volume shipped)
- Corporate overhead
- Legal costs
I don't think anyone who does these is claiming Apple is actually making 50% on these devices.
The article says EXACTLY that. Chill.
Fixed it for you
Thanks, yes.
Yes, because R&D, shipping, advertising, assembly, packaging, software development, and three years of updates is 100% free.
Come on, guys. You're perpetrating the lies that the trolls use.
Trolls yelping about Apple's margins should consider this. If Apple were to lower its margins and thereby the price of iOS devices then Apple would completely own both the smartphone and tablet markets. Android tablets in particular would be flushed down the toilet in a heartbeat. The fact that Apple can build such high quality products and maintain high margins reveals just how powerful their economy of scale is and how efficiently they run the business. So the trolls should watch what they complain about because it might come back and bite them in the arse. It also speaks volumes as to what Apple thinks of the market share metric. Market share is not more important to them than profit.
At the end of the day, thats all that really matters,.
I love how they "estimate" costs?to 5 significant figures.
It's even funnier than that. The most expensive item is estimated to only one significant figure. Most of the items are rounded off or estimated to full dollars, or at most, half dollars. But 'other' is estimated to the penny - which suggests to me that they simply use some standard percentage of the total.
In accounting, profit can be considered to be the difference between the purchase price and the costs of bringing to market whatever it is that is accounted as an enterprise (whether by harvest, extraction, manufacture, or purchase) in terms of the component costs of delivered goods and/or services and any operating or other expenses.
Also....
Gross profit equals sales revenue minus cost of goods sold (COGS), thus removing only the part of expenses that can be traced directly to the production or purchase of the goods. Gross profit still includes general (overhead) expenses like R&D, S&M, G&A, also interest expense, taxes and extraordinary items.
http://en.wikipedia.org/wiki/Profit_(accounting)
*sigh*
There's always this comment.
First, in figuring gross margins for a product things like R&D, advertising and software development are generally. not included.
The other costs you've mentioned are of course.
But, more than that. This tear down is only one perspective of a total analysis. I don't think anyone who does these is claiming Apple is actually making 50% on these devices. They are simply looking at the things they are able to analyze.
Chill.
I understand what you are trying to say, but you are being way too generous in your assessment of the intelligence of people in general to understand what they are reading. And in fact, the article, not just the headline, clearly claims that this is profit, not gross margin.
Apple's third-generation iPad will have a slightly lower profit margin of about 51 percent, based on a new estimate of hardware costs.
So AI's headline is wrong and misleading. But the overall gist is that this is purely a hardware gross margin.
Additionally the original EET article is more a comparison of previous to new iPad hardware costs and assuming those are the bulk and most variable of the costs between the two, it seems like a reasonable thing to be looking at.
Again, way too much credit given as to expectations that people understand what they are reading and/or take the time to click through any reference material and articles. And I'm not just talking about people reading and posting there. This is the exact type of thing that the mainstream media picks up and then reports as fact. CNN's web site has referenced AppleInsider's articles as sources of information. And the day after AI reported on the analysis that iPhone apps cost less than Android apps (which was some of the most crap analysis I've ever read) it was reported by our locale TV news station with no backgrouind or details. Just simply the wholey unsupported conclusion, "iPhone apps cost less than Android apps" and stating that should be a consideration when deciding between iPhone and Android.
So yes, AI should be roundly criticized for sloppy reporting like this.
Yes, because R&D, shipping, advertising, assembly, packaging, software development, and three years of updates is 100% free.
Come on, guys. You're perpetrating the lies that the trolls use.
+100000000000000000
So AI's headline is wrong and misleading. But the overall gist is that this is purely a hardware gross margin.
And who reads headlines, anyway?